TaxTMI 
TaxTMI 
2020 (2) TMI 628
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....ndent No.1, i.e. Prysmian Cavi E Sistemi SRL - a company registered under the laws of Italy. By this JVA, Respondent No.1 acquired a majority shareholding (51%) of Ravin's share capital. The material clauses of the JVA are set out hereinbelow: "8. Purpose and Objectives 8.1 Purpose of the Company and Scope of the Agreement Subsequent to Closing, the Company shall be a joint venture between Prysmian and the Existing Shareholders for the purposes of undertaking and conducting the business of the company, or for such other activities as may be determined by the Shareholders from time to time, subject to the applicable law. The business of the company shall be conducted in the best interests of the Company, and in accordance with sound professional and commercial principles." "12.6. Chairman and Managing Director 12.6.1 Mr. Karia shall be the Chairman of the Board as well as the Managing Director of the Company until: (i) Expiry of seven (7) years from the Agreement Date;or (ii) The date of which the Existing Shareholders ceaseto hold in the aggregate at least ten percent (10%) of the share capital of the Company: Whichever....
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....with the Managing Director. 12.7.3 Provided however, that subject to the overall supervision of the Board, after the efflux of the Integration Period, the CEO shall be responsible for the day to day management of the Company excluding solely the internal audit and the strategy and business development of the Company for which the Managing Director shall be responsible. Accordingly all the powers which are not delegated to the managers of the Company pursuant to the Delegation of Powers Policy, as may be amended by the Board from time to time, shall be delegated to the CEO to the extent such powers fall within his duties as aforesaid." "17. PROCEDURE FOR FAIR MARKET VALUATION 17.1 Notwithstanding anything contained in this Agreement, all references in this Agreement to Fair Market Value shall be the fair market value as determined, applying the definition of EBITDA, Net Financial Indebtedness (NFI) and Net Working Capital (NWC) set forth under Schedule X, by any one of the following four accounting firms settled in India: (a) KPMG (b) Ernst & Young; (c) PriceWaterhouseCoopers; (d) Deloitte 17.2 The accounting fi....
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....Mumbai-400093 (ii) Special Cable Industries, a company incorporated under the laws of India and having its registered office at A-1/404 GIDC Estate, Ankleshwar 393002." "23. Event of Default 23.1 If any party(" Defaulting Party") is in material breach of any provisions, obligations, covenants, conditions and undertakings under this Agreement , or in the event of insolvency or bankruptcy of the Defaulting Party or if the substantial undertaking or assets of the Defaulting Party is under receivership or any other equivalent status, it shall be considered as an event of default ("Event of Default"). 23.2 In such an event, the other party ("Non Defaulting Party") may give notice of the same ("Determination Notice") to the Defaulting Party. 23.3 The Defaulting Party shall have a period of 60(sixty) calendar days from the receipt of the Determination Notice (or Such further period as the Non Defaulting Party may agree in writing) to rectify the Event of Default(" Rectification Period"). It is hereby clarified that this clause 23.3 is not applicable if the Event of Default is represented by the insolvency or bankruptcy of the defaulting Party in which c....
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.... 27.1.2 Any dispute, controversy or claim arising out of or relating to or in connection with this Agreement including a dispute as to the validity or existence of the Agreement or the arbitration agreement, or any breach or alleged breach thereof, shall be settled exclusively by arbitration under the Rules of Arbitration of the London Court of International Arbitration ("LCIA") as amended from time to time. 27.1.3 The arbitral tribunal ("Tribunal") shall consist of one (1) arbitrator, to be appointed by the LCIA. The arbitrator shall be from a neutral nationality, i.e. from a nationality and origin other than any of the Parties. 27.1.4 The seat of the arbitration shall be London, United Kingdom. 27.1.5 The language to be used in the arbitration shall be English. 27.1.6 The law applicable and governing the arbitration agreement (proper law of the arbitration agreement) and in all respects including the conduct of the proceedings shall be English Law. If the Institution above named ceases to exist or is unable for any reason to administer the arbitration proceedings then the arbitration shall be conducted in accordance with the (English) A....
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....h, in November 2011, one Ms. Cinzia Farise was appointed as CEO in the place of Mr. Sarogni by the Board of Directors. Since the Board Resolution of 01.11.2011 conferred on Ms. Farise the power to employ and lay-off permanent staff, she imposed a temporary freeze and check on new hiring without her approval, which was alleged to be breached by the Appellants. Later, from December 2011 till February 2012, Ms. Farise sought to convene a board-meeting to finalise one Mr. Brunetti's appointment as CFO of Ravin, which was assented to by the Respondent's Directors, but not signed by the Appellant's Directors. Things reached a head on 31.01.2012 when the employees of the company went on a strike at Ravin's Akruti office. By February 2012, the Appellants and Respondent No.1 were at loggerheads, as a result of which Respondent No.1 issued a request for arbitration in terms of clause 27 of the JVA, claiming that the Appellants had committed 'material breaches' of the JVA, inter alia, by ousting Respondent No.1 from the control of Ravin altogether. On 26.03.2012, the Appellants responded to the request for arbitration and included several counter claims. Each party claimed that the other had ....
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....r, the sole arbitrator construed clause 21.1 of the JVA as follows: "82. This then brings directly into question the scope and meaning of the words used in Clause 21.1 when each of the Claimant and the First Respondent agreed that it would not directly or through its Affiliates "invest, acquire or participate in the Cable Business in India save through the Company in accordance with this Agreement". 83. The Tribunal concludes that these wordsthemselves do not prohibit the Claimant from selling cables directly in India. Such direct sales might still amount to a breach of Clause 8 or indeed Clause 20 of the JVA, but direct sales as a stand-alone activity is not an investment, acquisition or participation in the Cable Business in India. 84. It seems to the Tribunal that each of theseexpressions connotes different forms of long term engagement, arrangement or commitment involving either an injection or exchange of capital or know how on the part of the investor, acquirer or participator in the sphere of the activities identified by the compendious definition of Cable Business in India. 85. A person who concludes a contract of sale ofgoods to another ....
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....iate of the Claimant in circumstances where it is not disputed that Prysmian Spa is another person which Controls the Claimant. Equally, the continued carrying on of business in India through ACPL is capable of amounting to the participation in the Cable Business in India through an Affiliate of the Claimant; namely through another person, ACPL. Although there has not been any proof of this question, there would at least appear to be some evidence on which the Respondents might contend that ACPL is Controlled by the same person, namely Prysmian Spa, who directly or indirectly Controls the Claimant so as to come within the parameters of sub-paragraph (c) of the definition of Affiliate." 10. The learned arbitrator then construed clause 23, which speaks of 'material breaches' by the parties, as follows: "132. The Tribunal's conclusions are as follows: 1) Clauses 23.1 and 23.2 do require the giving of a Determination Notice of an Event of Default by the Non Defaulting Party, if indeed the Non Defaulting Party wishes to make complaint, and if, ultimately, the Non Defaulting Party wishes to invoke the provisions of Clauses 23.4 and 23.7, even in circumstances w....
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....s to damages and performance expressed in Clause 23.6; 8) It remains open for argument, and the Tribunal makes no decisions as to whether a party can give a Determination Notice to the other party, if in fact at the time of the giving of the notice, the party giving the notice is itself in material breach. This question was raised by the Tribunal in the course of oral submissions, but has not been fully addressed by the parties, and, indeed, is probably best addressed at the full merits hearing." 11.Insofar as the arbitrator's ruling on jurisdiction was concerned, it was held that a dispute regarding the right to register the 'Ravin' trademark falls outside the scope of the arbitration clause under the JVA. He further held that the trademark licence agreements contained arbitration clauses which provided for disputes to be referred to arbitration in Milan, Italy under Italian law, and this being the case, any dispute in relation to these agreements would be outside the ken of the arbitration clause contained in the JVA. 12.The 'Second Partial Final Award' dated 19.12.2013 then dealt with which of the parties materially breached the terms and conditions of the JVA. Th....
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....using to convene a Board meeting at short notice; 10) Mr Karia's letters to the FRRO were handdelivered on 29 February 2012 and therefore cannot be considered in relation to the events constituting material breach as alleged in the Request dated 27 February 2012. Nevertheless, the Tribunal finds that the letters to the FRRO are consistent with Mr Karia's modus operandi and support the Tribunal's other findings of material breach. (4) Rectification of the Events of Default found to have been committed by the Respondents 200. The Claimant submits that none of the allegedmaterial breaches were rectifiable and, in any event, by the end of the Rectification Period, i.e. 27 April 2012, and by the end of the extended period for rectification, i.e. 6 July 2012, the Respondents had not rectified any of their breaches. On the contrary, the Claimant submits that during the period between 28 February 2012 and 6 July 2012, the Respondents continued to breach the JVA by conduct which was calculated to destroy the relationship of trust and confidence between the parties and completely remove or render redundant any element of Claimant control over Ravin. As stated above....
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....time analysing this material because Mr Karia's contemporaneous reaction is highly instructive in determining whether this is really to be analysed as a serious or material breach with serious adverse effect or rather as a pretext, an excuse. The Tribunal concludes it is the latter not the former. The Respondents somewhat bravely in their Closing Submissions assert that the Tribunal is not allowed to have regard to this material because the Claimant has not pleaded waiver or affirmation. This submission is completely rejected. As is clear from the authorities referred to above whether a breach is material or not is determined by reference to all the relevant facts and this will include a parties' reaction to the events at the time. xxx xxx xxx 237. The Tribunal ultimately concluded that the Respondent did not adduce any credible evidence of actual serious adverse impact. 238. It is true that there was some evidence (albeit mainly dating back to 2008-2009) of occasional instances of both companies tendering for the same business. Yet there was no reliable evidence that business had been lost from Ravin to ACPL post the Draka acquisition, or that there had ....
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....her allegation that ACPL had been acquired in bad faith by the Claimant with a view to destroying value in Ravin or that it has since pursued the operations of ACPL with that aim in view. 244. There is quite simply no credible evidence tosupport such an allegation and indeed the Tribunal is of the view that it is an allegation which should not have been advanced." 14.So far as the counter claim dealing with direct sales in India which competed with the business of Ravin, and agency/distribution agreements, the arbitrator held as follows: "252. Essentially the Respondents have not established that the Agency Agreements on which they place reliance, involved such an arrangement, commitment or engagement as stated in the First Partial Award. Indeed the Respondents have not even addressed the requirement identified in paragraph 84 of the First Partial Final Award but instead focused on the length or duration of the relationship and whether or not each relationship was exclusive or nonexclusive. This is not sufficient. For the avoidance of doubt the Tribunal concludes that there was no satisfactory basis on which it could be concluded that these Agency Agreements in....
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....hing else. This was once more how it was put by Mr. Salve SC in his oral closing argument (Day 10, pp. 183-185) the Tribunal has, however, found against the Respondents on this point. 279. The Tribunal concludes that the Respondentshave not shown any material breach on the part of the Claimant in the development of Ravin's business in accordance with clause 8 or any breach of the good faith obligations under Clause 20 with respect to direct sales." 15.So far as the breach of confidentiality by Respondent No.1 was concerned, the counter claim of the Appellants was rejected thus: "284. Ms. Farise was quite clear in her First Witness Statement of 20 July 2012 (E(I)/5/29) at paragraph 22 (j) - (I) that she was a non-executive director at ACPL, that she was quite aware of her responsibilities to both companies and did not at any time pass on confidential or other information to ACPL from Ravin or from ACPL to Ravin. 285. The Respondents did not cross examine MsFarise on this important evidence. It is accepted by the Tribunal. 286. The Respondents instead in their ClosingSubmissions do not address the question of evidence of actual breach but instea....
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....ch was the situation at the ground that it was not really possible for Claimant nominees to attend without fear of their own safety. 294. Lastly, the circumstances surrounding theappointment of the CEO and CFO does not give rise to any conceivable material breach on the part of the Claimant. The claimant was entitled to nominate a CFO and the CEO. They did so. The Respondents did not oppose the appointment of Ms Farise. Nevertheless they did obstruct her at every turn once she was appointed because it became apparent that she intended pursuant to the JVA to take day to day control of Ravin and the Respondents did not wish this to happen. As regards Mr. Brunetti, the CFO, the Respondents did veto his appointment. This was not a material breach on their part as it was their right to do so under Schedule IX to the JVA. Nevertheless it cannot be said to be a material breach by the Claimant. That is unsustainable." 17. Holding thus, the learned sole arbitrator concluded that none of the counter claims were made out, as a result of which they were all dismissed. 18.The Third Partial Final Award was delivered on 14.01.2015. Prior to this award, on 23.06.2014, the K....
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....ribunal reserves the matters set out inparagraph 31 above, which includes the costs of the arbitration. 7. Notwithstanding paragraph 6 above, the Tribunalrecords the further costs of the arbitration (other than the legal or other costs incurred by the parties themselves and other than those costs recorded in the Second Partial Final Award) up to the date of this Award, which have been determined by the LCIA Court, pursuant to Article 28.1 of the applicable (1998) Rules, to be as follows: LCIA'S administration charge GBP6,353.33 Tribunal's fees GBP29,800.00 Total further costs of the arbitration GBP36,153.33 8. The Tribunal's previous Procedural Orders andInterim Relief as amended by Procedural Order No.12 are to continue in effect until further Order." 19. By the Final Award dated 11.04.2017, the learned sole arbitrator dealt with why and how Deloitte was appointed as the valuer of the shares; why Ravin's 49% stake in 'Power Plus' was excluded for purposes of valuation as clause 17.1 of the JVA and the formula stated in Schedule X would have to be strictly followed; and as to what then is the fair market value of the shares of the Appellants i....
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..... Piyush Karia, themselves or through servants or agents are restrained from acting, or claiming or holding themselves out to be the Chairman or Managing Director and as Executive Director, respectively, or directors of the Company (except for the limited purpose as set out in (3)(above)). 6) The Respondents jointly and severally do pay to the Claimant the legal and sundry disbursements costs of and relating to this Arbitration in the sum of US$2,317,199.82. 7) The Respondents are to bear and, insofar as not already paid, to reimburse the Claimant the total costs of the Arbitration as determined by the LCIA Court pursuant to Article 28.1 of the LCIA Rules, which are GBP 283,043.71. 8) All other claims of the Claimant and Respondents are dismissed." 21.It is important to note that no challenge was made to the aforesaid award under the English Arbitration Law, though available. It is only when the aforesaid award was brought to India for recognition and enforcement that objections to the said award were made under Section 48 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Arbitration Act"). 22.The learned single Judge, i....
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.... We are saying this because this matter has been argued for several days before us as if it was a first appeal from a judgment recognising and enforcing a foreign award. Given the restricted parameters of Article 136, it is important to note that in cases like the present - where no appeal is granted against a judgment which recognises and enforces a foreign award - this Court should be very slow in interfering with such judgments, and should entertain an appeal only with a view to settle the law if some new or unique point is raised which has not been answered by the Supreme Court before, so that the Supreme Court judgment may then be used to guide the course of future litigation in this regard. Also, it would only be in a very exceptional case of a blatant disregard of Section 48 of the Arbitration Act that the Supreme Court would interfere with a judgment which recognises and enforces a foreign award however inelegantly drafted the judgment may be. With these prefatory remarks we may now go on to the submissions of counsel. 25.Dr. Abhishek Manu Singhvi, Senior Advocate, led the charge so far as the Appellants are concerned. Ably assisted by Shri Nakul Dewan on the law, the le....
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....ned arbitrator in the First Partial Final Award of clause 21.1, stating that it only prohibited long-term arrangements and engagements, which was a condition added by the arbitrator himself into the said clause. (7)So far as direct sales of Respondent No.1 in India were concerned, the tribunal ignored material evidence and admissions of Respondent No.1. (8)That the tribunal's analysis of the contemporaneous conduct of the parties was both selective and perverse, that the consideration of the evidence of key witnesses was also selective and perverse. (9)That Deloitte was a conflicted valuer and should not have been appointed at all. The valuer adopted a course for valuation that is contrary to both parties' position, in that, Ravin's 49% shareholding in Power Plus which had been valued by another valuer 'BDO' at INR 563 crores was completely ignored. What is very important is that the tribunal had acted contrary to the parties' submissions in arriving at the valuation date, as the said date should have been the date closest to the date of the actual sale of shares, instead of which, a 2017 award took a date of September 2014 which date in any case expired ....
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.... by the tribunal to one party to the exclusion of another would fatally undermine the independence and impartiality of the arbitration process, rendering the award vulnerable on the ground of bias. 29.Both Dr. Singhvi and Mr. Nakul Dewan, after setting out all the aforesaid grounds and case law supporting such grounds, have attacked the impugned High Court judgment, stating that a large number of these points were not answered by the High Court at all, and when answered would show that even where there was bias, perversity and breach of natural justice, all these grounds were merely brushed aside, and therefore no real determination of all the points argued before the High Court was at all undertaken by the learned Single Judge. As a 'without prejudice' argument, Dr. Singhvi exhorted us to modify the impugned award, in case he were to fail on all other arguments, to state that the valuation date of 30.09.2014 ought at least to be the date of the judgment delivered in this case, as otherwise the sale of the Karia block of shares in Ravin would be at a tremendous undervalue. This he exhorted us to do under Article 142 of the Constitution of India. 30.Shri Kapil Sibal, learned s....
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.... so, everything else followed, as a result of which it was the Respondent No.1 who was to buy-out the Appellants' 49% stake in Ravin at a price arrived at by a well-known independent valuer, Deloitte, at a date that was correctly fixed by the arbitral tribunal. This being the heart of the case, all the contentions of Dr. Singhvi raising objections to the four awards in question must fall, as every argument, though dressed up as arguments falling within three grounds under Section 48, are really arguments addressing the merits of the case. Without prejudice to this central argument, Shri Sibal took up every single point that was argued and answered each point. So far as the Jaguar Communication Consultancy Services Private Limited point was concerned, Shri Sibal stated that at no point did the Appellant amend its counter-claim to include such argument, which was in fact raised orally as an afterthought at the fag end of the proceedings. Secondly, as Shri Sibal's case of ouster was accepted by the arbitral tribunal, the claim of the Appellants that it was really the other way around was specifically addressed by the learned arbitrator and dismissed, inter alia on the ground that oust....
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..... So far as the direct sales of Respondent No.1 in India were concerned, the tribunal took into account all the material evidence and dismissed, after a full hearing, the counter-claim of the Appellants in this behalf. When it came to the Final Award, Shri Sibal pointed out that on facts Deloitte was appointed by consent long after the valuer that was chosen by lots finally stated its inability to conduct the valuation due to the Appellants dragging their feet in this behalf. Secondly, such valuation was conducted strictly as per the formula contained in the JVA, which was Clause 17.1 read with Schedule X of the JVA. He was at pains to point out that though Power Plus Company LLC (hereinafter referred to as "Power Plus") was mentioned specifically in the JVA, yet nothing about Power Plus was mentioned in the formula for valuation. Shri Sibal also refuted any so called inconsistencies in the awards, stating that given the interpretation of the JVA by the arbitrator in the First Partial Final Award, all the awards that followed were in accord with the interpretation so given. He also stated that the arbitrator considered material breach with an even hand and arrived at the obvious co....
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....tended by the learned arbitrator to both parties, no ground relatable to breach of natural justice or any prejudice as a result was made out on the facts. He then made it clear that public policy must be understood in the narrow sense as understood and exposited by Renusagar (supra) and the later decisions of this Court. There was also nothing in the awards that would shock the conscience of the Court to attract the most basic notions of justice exception contained in Section 48. Enforcement of Foreign Awards under Section 48 33.Having heard learned counsel on both sides, it is important to first set out the relevant parts of Section 48 of the Arbitration Act. Section 48 reads as follows: "48.Conditions for enforcement of foreign awards. - (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that - xxx xxx xxx (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; xxx xxx xxx (2) Enforcement of an ar....
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....d held: "34. Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of clauses (a) to (e) of Article I had to be fulfilled and in Article II, it was prescribed that even if the conditions laid down in Article I were fulfilled recognition and enforcement of the award would be refused if the Court was satisfied in respect of matters mentioned in clauses (a), (b) and (c). The principles which apply to recognition and enforcement of foreign awards are in substance, similar to those adopted by the English courts at common law. (See: Dicey & Morris, The Conflict of Laws, 11th Edn., Vol. I, p. 578). It was, however, felt that the Geneva Convention suffered from certain defects which hampered the speedy settlement of disputes through arbitration. The New York Convention seeks to remedy the said defects by providing for a much more simple and effective method of obtaining recognition and enforcement of foreign awards. Under the New York Convention the party against whom the award is sought to be enforced can object to recognition and enforcement of the foreign award on grounds set out in sub-clauses (a) to (e....
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.... narrowly. In this context, it would also be of relevance to mention that under Article I(e) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol & Convention Act of 1837 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression "public policy" covers the field not covered by the words "and the law of India" which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. 66. Article V(2)(b) of the New York Conventionof 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforceme....
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....uld govern the scope of such proceedings. 29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression "public policy of India" occurring in Section 34(2)(b)(ii) in Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2) (b). 30. It is true that in Phulchand Exports [Phulchand Exports Ltd. v. O.O.O. Patriot, (2011) 10 SCC 300 : (2012) 1 SCC (Civ) 131] a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) accepted the submission made on behalf of the appellant therein that the meaning given to the expression "public policy of India" in Section 34 in Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] must be applied to the same expression occurring in Section 48(2)(b) of the 1996 Act. However, in what we have discussed above it must be held that the statement in para 16 of the Report that the expression "public poli....
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....ards. For, the same was intrinsically linked to the question of enforceability of the subject foreign awards. In any case, all contentions available to the petitioner in that regard could and ought to have been raised specifically and, if raised, could have been examined by the Court at that stage itself. We are of the considered opinion that the scheme of Section 48 of the Act does not envisage piecemeal consideration of the issue of maintainability of the execution case concerning the foreign awards, in the first place; and then the issue of enforceability thereof. Whereas, keeping in mind the legislative intent of speedy disposal of arbitration proceedings and limited interference by the courts, the Court is expected to consider both these aspects simultaneously at the threshold. Taking any other view would result in encouraging successive and multiple round of proceedings for the execution of foreign awards. We cannot countenance such a situation keeping in mind the avowed object of the Arbitration and Conciliation Act, 1996, in particular, while dealing with the enforcement of foreign awards. For, the scope of interference has been consciously constricted by the legislature in....
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....public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. xxx xxx xxx 43. We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent "errors of jurisdiction", it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation (which would include going beyond the terms of the contract), could be said to have been fairly comprehended as "disputes" within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator i....
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.... Geneva Convention of 1927, 92 League of Nations Treaty Ser. 302.The 1958 Convention's basic thrust was to liberalize procedures for enforcing foreign arbitral awards: While the Geneva Convention placed the burden of proof on the party seeking enforcement of a foreign arbitral award and did not circumscribe the range of available defences to those enumerated in the convention, the 1958 Convention clearly shifted the burden of proof to the party defending against enforcement and limited his defenses to seven set forth in Article V. See Contini, International Commercial Arbitration, 8 Am.J.Comp.L. 283, 299 (1959). Not a signatory to any prior multilateral agreement on enforcement of arbitral awards, the United States declined to sign the 1958 Convention at the outset. The United States ultimately acceded to the Convention, however, in 1970, (1970) 3 U.S.T. 2517, T.I.A.S. No. 6997, and implemented its accession with 9 U.S.C. 201-208. Under 9 U.S.C. 208, the existing Federal Arbitration Act, 9 U.S.C. 1-14, applies to the enforcement of foreign awards except to the extent to which the latter may conflict with the Convention. See generally, Comment, International Commercial Arbitration u....
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..... v. Societe Generale de L'Industrie du Papier, 508 F.2d 969, 973 (2d Cir.1974). To facilitate this policy, which applies with special force in the field of international commerce, see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985), the courts have developed a "general proenforcement bias," Parsons & Whittemore Overseas Co., 508 F.2d at 973, under which the burden of proof rests on the party challenging the arbitration award, Dworkin Cosell Interair Courier Servs., Inc. v. Avraham, 728 F.Supp. 156, 158 (S.D.N.Y.1989); Overseas Private Invest. Corp. v. Anaconda Co., 418 F.Supp. 107, 110 (D.D.C.1976), and the grounds for refusing to recognize arbitral awards are narrowly construed, Parsons & Whittemore Overseas Co., 508 F.2d at 976-77. xxx xxx xxx The few courts to address this provision of the Convention have concluded that the provision "essentially sanctions the application of the forum state's standards of due process." See Parsons & Whittemore Overseas Co., 508 F.2d at 975; Geotech Lizenz AG v. Evergreen Systems, Inc., 697 F.Supp. 1248, 1263 (E.D.N.Y.1988) (citing Parsons & Whittemore Overseas Co.). Due process requir....
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....ified in Article V. The New York Convention and the implementing legislation, Chapter 2 of the Federal Arbitration Act ("FAA"), provide that a secondary jurisdiction court must enforce an arbitration award unless it finds one of the grounds for refusal or deferral of recognition or enforcement specified in the Convention. The Court may not refuse to enforce an arbitral award solely on the ground that the arbitrator may have made a mistake of law or fact. "Absent extraordinary circumstances, a confirming court is not to reconsider an arbitrator's findings." The party defending against enforcement of the arbitral award bears the burden of proof. Defences to enforcement under the New York Convention are construed narrowly "to encourage the recognition and enforcement of commercial arbitration agreements in international contracts..."" (emphasis supplied) 44. Likewise, in Admart AG v. Stephen and Mary Birch Foundation Inc. 457 F.3d 302 (2006), the U.S Court of Appeals, 3rd Circuit, after setting out Article V of the New York Convention, held as follows: "To carry out the policy favoring enforcement of foreign arbitral awards, courts have strictly applied t....
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.... under Section 48 of the Arbitration Act be refused only if the party resisting enforcement furnishes to the Court proof that any of the stated grounds has been made out to resist enforcement. The said grounds are watertight - no ground outside Section 48 can be looked at. Also, the expression used in Section 48 is "may". Shri Viswanathan has argued that "may" would vest a discretion in a Court enforcing a foreign award to enforce such award despite the fact that one or more grounds may have been made out to resist enforcement. For this purpose, he relied upon Sections 45 to 47, which contain the word "shall" in contradistinction to the word "may". He also relied upon Article V of the New York Convention which also uses the word "may". 47.Gary Born in International Commercial Arbitration, Vol. II (2009) puts it thus: "No Obligation under New York Convention to Deny Recognition of Awards Nothing in the New York Convention requires a Contracting State ever to deny recognition to an arbitral award. The Convention requires only that Contracting States recognize awards (and arbitration agreements) in specified circumstances. Nothing in Article V, nor the basic struc....
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....story of the Convention of any intention to prevent Contracting States from recognizing foreign awards under provisions of local law that are more liberal than Article V." 48.Redfern and Hunter on International Arbitration, 6th Edn. (2015) states: "11.59 Fourthly, even if grounds for refusal of recognition and enforcement of an award are proved to exist, the enforcing court is not obliged to refuse enforcement. The opening lines of Article V(1) and (2) of the Convention say that enforcement 'may' be refused; they do not say that it 'must' be refused. The language is permissive, not mandatory. The same is true of the Model Law." 49.Likewise, Albert Jan van den Berg's The New York Arbitration Convention of 1958 (1981) states: "It is to be noted that the opening lines of both the first and the second paragraph of Article V employ a permissive rather than mandatory language: enforcement "may be" refused. For the first paragraph it means that even if a party against whom the award is invoked proves the existence of one of the grounds for refusal of enforcement, the court still has a certain discretion to overrule the defence and to grant the enforcement of the aw....
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....en the resistance to a foreign award in the U.K - the discretion of a Court to enforce such award, even if grounds to resist the award have been made out, was set out thus: "Per Lord Mance: Discretion 67. Dallah has a fall-back argument, which has alsofailed in both courts below. It is that s.103(2) of the 1996 Act and Article V(1) of the New York Convention state that "Recognition and enforcement of the award may be refused" if the person against whom such is sought proves (or furnishes proof of) one of the specified matters. So, Miss Heilbron submits, it is open to a court which finds that there was no agreement to arbitrate to hold that an award made in purported pursuance of the non-existent agreement should nonetheless be enforced. In Dardana Ltd v Yukos Oil Company [2002] 1 All ER (Comm) 819 I suggested that the word "may" could not have a purely discretionary force and must in this context have been designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have enforcement or recognition refused (paras 8 and 18). I also suggested as possible examples of such circum....
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....pparent from the difference in wording between the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 and the New York Convention. The Geneva Convention provided (article 1) that, to obtain recognition or enforcement, it was necessary that the award had been made in pursuance of a submission to arbitration which was valid under the law applicable thereto, and contained (article 2) mandatory grounds ("shall be refused") for refusal of recognition and enforcement, including the ground that it contained decisions on matters beyond the scope of the submission to arbitration. Article V(1)(a) of the New York Convention (and section 103(2)(b) of the 1996 Act) provides: "Recognition and enforcement of the award may be refused ..." See also van den Berg, p 265; Paulsson, May or Must Under the New York Convention: An Exercise in Syntax and Linguistics (1998) 14 Arb Int 227. 127. Since section 103(2)(b) gives effect to aninternational convention, the discretion should be applied in a way which gives effect to the principles behind the Convention. One example suggested by van den Berg, op cit, p 265, is where the party resisting enforcement is estopped from challenge, ....
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....on the discretion in the New York Convention, article V(1) and on the power under article VII(1) (see Karaha Bodas Co v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F 3d 357, 367 (5th Cir 2003)) and whether it was correctly decided was left open in TermoRio SA ESP v Electranta SP, ante, at p 937. 131. The power to enforce notwithstanding that theaward has been set aside in the country of origin does not, of course, arise in this case. The only basis which Dallah puts forward for the exercise of discretion in its favour is the Government's failure to resort to the French court to set aside the award. But Moore-Bick LJ was plainly right in the present case (at para 61) to say that the failure by the resisting party to take steps to challenge the jurisdiction of the tribunal in the courts of the seat would rarely, if ever, be a ground for exercising the discretion in enforcing an award made without jurisdiction. There is certainly no basis for exercising the discretion in this case." 52.A learned single judge of the Delhi High Court in Cruz City 1 Mauritius Holdings v. Unitech Limited (2017) 239 DLT 649, adverted to this issue and held: "28. Whilst this....
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....onsiderations may not be of any significant relevance in considering whether enforcing the award contravenes the public policy of India. 31. It is necessary to bear in mind that Section 48 of the Act is a statutory expression of Article V of the New York Convention and is similarly worded. The object of Article V of the New York Convention is to enable the signatory States to retain the discretion to refuse enforcement of a foreign award on specified grounds and none other; it does not compel the member States to decline enforcement of foreign awards. Article V of the convention thus sets out the maximum leeway available to member States to refuse enforcement of a foreign award. This view has also been accepted by courts in the United States. In Chromalloy Aeroservices. v. The Arab Republic of Egypt: 939 F. Supp. 907 (DDC 1996), an Egyptian award, which was set aside by an Egyptian court, was enforced notwithstanding Article V(1)(e) of the New York Convention. 32. The principle that courts may enforce a foreign award notwithstanding that one or more of the specified grounds have been established, is also accepted in the United Kingdom. (See: China Agribusiness Dev....
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....her declining to enforce a foreign award would be more debilitating to the cause of justice, than to enforce it. In such cases, the court would be compelled to evaluate the nature, extent and other nuances of the public policy involved and adopt a course which is less pernicious. xxx xxx xxx 43. Thus, whilst there is no absolute or open discretion to reject the request for declining to enforce a foreign award, it cannot be accepted that it is totally absent. The width of the discretion is narrow and limited, but if sufficient grounds are established, the court is not precluded from rejecting the request for declining enforcement of a foreign award." 53.When the grounds for resisting enforcement of a foreign award under Section 48 are seen, they may be classified into three groups - grounds which affect the jurisdiction of the arbitration proceedings; grounds which affect party interest alone; and grounds which go to the public policy of India, as explained by Explanation 1 to Section 48(2). Where a ground to resist enforcement is made out, by which the very jurisdiction of the tribunal is questioned - such as the arbitration agreement itself not being valid und....
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....aim or counter-claim, this would breach the broader requirements of the audi alteram partem rule of natural justice and would, therefore, be covered by Section 48(1)(b) of the Act. 56.This Court in Ssangyong (supra) has dealt with this aspect of Section 48 as follows: "37. Under the rubric of a party being otherwise unable to present its case, the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the Tribunal, on which the parties have had no opportunity to comment, the ground under Section 34(2)(a)(iii) would be made out. In New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards - Commentary, edited by Dr. Reinmar Wolff (C.H. Beck, Hart, Nomos Publishing, 2012), it is stated: "4. Right to Comment According to the principle of due process, the tribunal must grant the parties an opportunity to comment on all factual and legal circumstances that may be relevant to the arbitrators' decision-making. a) Right to Comment on Evidence and Arguments Submitted by the Other Party As part of their right to comment, the parties must be given an opportu....
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....owledge if it intends to base its decision on those facts, unless the parties should have known that those facts could be decisive for the final award."(emphasis in original) In Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer Law International, 1999) ["Fouchard"] it is stated: "In some rare cases, recognition or enforcement of an award has been refused on the grounds of a breach of due process. One example is the award made in a quality arbitration where the defendant was never informed of the identity of the arbitrators hearing the dispute [Danish buyer v German (F.R.) seller, IV Y.B. Comm. Arb. 258 (1979) (Oberlandesgericht Cologne)]. It also occurred in a case where various documents were submitted by one party to the arbitral tribunal but not to the other party [G.W.I. Kersten & Co. B.V. v. Société Commerciale Raoul Duval et Co., XIX Y.B. Comm. Arb. 708 (Amsterdam Court of Appeals) (1992)], in another case where the defendant was not given the opportunity to comment on the report produced by the expert appointed by the tribunal [Paklito Inv. Ltd. v. Klockner East Asia Ltd., XIX Y.B. Comm. Arb. 664, 671 (Supreme Court o....
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....l Commercial Arbitration (Kluwer law International, 2003), 406]. Similarly, in Kanoria v Guinness, [2006] EWCA Civ. 222, the English Court of Appeal decided that the respondent had not been afforded the chance to present its case when critical legal arguments were made by the claimant at the hearing, which the respondent could not attend due to a serious illness. In the circumstances, the court decided that 'this is an extreme case of potential injustice' and resolved not to enforce the arbitral award. 11.74. Examples of unsuccessful 'due process' defences to enforcement are, however, more numerous. In Minmetals Germany v Ferco Steel, [1999] CLC 647, the losing respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the arbitral tribunal had obtained through its own investigation. An English court rejected this defence on the basis that the respondent was eventually given an opportunity to ask for the disclosure of evidence at issue and comment on it, but declined to do so. The court held that the due process defence to enforcement was not intended to accommodate circumstances in which a party had fail....
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.... of a person being prevented from presenting its case by matters outside his control. This was done in Minmetals Germany GmbH v. Ferco Steel Ltd. (1999) C.L.C. 647 as follows: "In my judgment, the inability to present a case to arbitrators within s.103(2)(c) contemplates at least that the enforcee has been prevented from presenting his case by matters outside his control. This will normally cover the case where the procedure adopted has been operated in a manner contrary to the rules of natural justice. Where, however, the enforcee has, due to matters within his control, not provided himself with the means of taking advantage of an opportunity given to him to present his case, he does not in my judgment, bring himself within that exception to enforcement under the convention. In the present case that is what has happened" 60.Likewise, in Ajay Kanoria v. Tony Guinness (2006) EWCA Civ 222 the Court of Appeal in England referred to Minmetals (supra) with approval as follows: "23. There is not much authority on the meaning of section 103(2)(c) of the 1996 Act. In Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315 , 326, Colman J observed: ....
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....ught to be drawn, but it failed to persuade the tribunal to draw the adverse inference. The tribunal examined the other evidence before it, considered the submissions of the parties and rightfully exercised its fact finding and decision making powers not to draw the adverse inference as it was entitled to do so. It would appear to me that the tribunal was doing nothing more than exercising its normal fact finding powers to determine whether or not an adverse inference ought to be drawn." 62.Other English judgments deal with the expression "unable to present his case" as a breach of a facet of natural justice at the hearing stage only. Thus, in Gbangbola v. Smith and Sheriff 1998 3 All ER 730, the Court held: "A tribunal does not act fairly and impartially if it does not give a party an opportunity of dealing with arguments which have not been advanced by either party. It is not suggested by the claimant contractor that either of the two points mentioned in the arbitrator's letter was raised by it in the arbitration as being influential on the overall burden and determination of costs. Unless such an opportunity is given there is danger that the final result....
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....case on fraud rather than allocate responsibility on the footing of a good faith mistake on the part of Malicorp. It would similarly have been astonishing, if there had been any suggestion that damages in place of reinstatement were contemplated, that Egypt would fail to protest that such damages could not properly incorporate an element for loss of profit. There were undoubtedly strong arguments for Egypt to advance in these respects among others. The notion that, in the absence of any mention of these matters, Egypt could and should have anticipated the basis of proceeding adopted in the Cairo award, is to my mind manifestly repugnant to elementary principles of fairness. 42. The failure of the tribunal to ensure that Egypt had warning of these matters can only constitute a serious breach of natural justice. In so far as I have any discretion to enforce the award despite that breach, I decline to do so: the breach is too serious, and the consequences for Egypt are too grave. It is suggested that the hearing be reconvened so that Mr Soliman can give evidence and be cross-examined. I decline to take this course: for the reasons given above, Mr Soliman's statement canno....
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....ment may attract serious and sustainable challenges. (b) Fairness, however, is a multidimensional conceptand it would also be unfair to the successful party if it were deprived of the fruits of its labour as a result of a dissatisfied party raising a multitude of arid technical challenges after an arbitral award has been made. The courts are not a stage where a dissatisfied party can have a second bite of the cherry. (c) Indeed, the latter conception of fairness justifies apolicy of minimal curial intervention, which has become common as a matter of international practice. To elaborate, minimal curial intervention is underpinned by two principal considerations. First, there is a need to recognise the autonomy of the arbitral process by encouraging finality, so that its advantage as an efficient alternative dispute resolution process is not undermined. Second, having opted for arbitration, parties must be taken to have acknowledged and accepted the attendant risks of having only a very limited right of recourse to the courts. It would be neither appropriate nor consonant for a dissatisfied party to seek the assistance of the court to intervene on the basis that the....
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....cted to consult the parties on his thinking process before finalising his award unless it involves a dramatic departure from what has been presented to him. (f) Each case should be decided within its own factualmatrix. It must always be borne in mind that it is not the function of the court to assiduously comb an arbitral award microscopically in attempting to determine if there was any blame or fault in the arbitral process; rather, an award should be read generously such that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied." (emphasis supplied) 66.In JVL Agro Industries Ltd v. Agritrade International Pte Ltd. (2016) SGHC 126, the Court held that the natural justice provision contained in Section 24(b) of the International Arbitration Act (Singapore) was breached when new points are taken up by the arbitrator, i.e. points not argued by either party, which formed the basis of the award. Since these new points were not put to the parties, natural justice was said to be breached in the facts of that case. Likewise, in G.D. Midea Air Conditioning Equipment Co. v. Tornado Consumer Goods Ltd. (2017....
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....imate complaint that there was a breach of Art 32 of the Arbitration rules and Art 45 of the PRC Arbitration Law. It can be said that the defendant did not have a proper opportunity to present its case to the Tribunal after the inspection and the compilation of the experts' report." 68.Shri Nakul Dewan, however, relied upon a number of judgments to buttress his submission that failure to deal with material issues would fall within Section 48(1)(b) of the Arbitration Act, as a result of which a foreign award could not be enforced. He cited Ascot Commodities NV v. Olam International Ltd. 2001 WL 1560709, for this proposition. This judgment was delivered keeping in mind Section 68 of the Arbitration Act, 1996 (U.K), which states as follows: "68. Challenging the award: serious irregularity. (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) a....
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....mely, Section 23(2) of Old Arbitration Ordinance (Cap 391), enabled an award to be set aside on the ground of error of law. In this context, it was held: "44. In light of Zebra's above submissions, the question of law that arises is whether the arbitrator was wrong in law in failing to take into account of the Venture Capital Clauses in determining Zebra's claim for damages. xxx xxx xxx 47. In my view, properly looked at, a claim on damages for breach of the Agreement based on and by reference to the Venture Capital Clauses had been put forward by Zebra in the SD. xxx xxx xxx 49. In the circumstances, I think the arbitrator has also committed an error of law in failing to consider and address this part of Zebra's claim for consequential damages, if any, for the loss of chance in securing a venture capital fund investment and the listing of the company. 50. I would therefore also remit this part of the Award to the arbitrator for his reconsideration. These issues for reconsideration are closely tied with the assessment of the relevant parts of the evidence on the alleged loss of chance, if any, and should best be dealt with by the arbitra....
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....id that it is plain and obvious, or beyond any doubt, that the Award would have been the same, if the Limitation Defence had been considered (Brunswick Bowling & Billiards Corp v Shanghai Zhonglu Industrial Co Ltd [2011] 1 HKLRD 707; Paklito Investment Ltd v Kolckner East Asia Ltd [1993] 2 HKLR 49). This is not a case in which different defences are raised, any one of which would have defeated the claims made, such that the failure to deal with any one of the other defences would not have made any difference to the award. 35. For the above reasons, I consider that there issufficient injustice arising out of the Award, in its current form, which cannot be overlooked by the Court's conscience, and that enforcement of the Award would offend our notions of justice." This finding was given under Article 34(2)(b) of the UNCITRAL Model Law on International Commercial Arbitration, 1985 which states as follows: "Article 34. Application for setting aside as exclusive recourse against arbitral award 2. An arbitral award may be set aside by the court specified in article 6 only if: (b) the court finds that: (i) the subject-matter of the dispute is not cap....
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....on and ordered that the part of the Award dealing with Front Row's counterclaim and with costs of the Arbitration be set aside as a whole. I further ordered that the part of the Award so set aside be tried afresh by a newly appointed arbitrator. Finally, I also ordered that the costs of and incidental to Front Row's application be paid by Daimler to Front Row." 72. In TMM Division Maritime SA v. Pacific Richfield Marine Pte Ltd. (2013) SGHC 186, the Singapore High Court referred to Section 24(b) of the International Arbitration Act (Singapore), which requires an award to be set aside if the rules of natural justice are breached. In arriving at its conclusion under the caption "General Principles of Curial Scrutiny", the Court held "However, it does not follow, and neither do I accept, that this process always entails sifting through the entire record of the arbitral proceedings with a fine-tooth comb." (See paragraph 42). The Court also held, "the Court should not nit-pick at the award. Infelicities are to be expected and are generally irrelevant to the merits of any challenges" (See paragraph 45). The Court went on to hold that the high standard of cogent reasons required by th....
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....ven dispense with reasons. Its conclusion will be sufficient because the reasons behind the conclusion are a matter of necessary inference: at [32]. (c) Decisions or findings which do not bear directly onthe substance of the dispute or affect the final resolution of the parties' rights may not require detailed reasoning. As a rule of thumb, the more profound the consequences of a specific decision, the greater the necessity for detailed reasoning: at [33]. (d) There should be a summary of all the key relevantevidence but not all the detailed evidence needs to be referred to: at [34]. (e) The parties' opposing stance and the judge'sfindings of fact on the material issues should be set out. However, the judge does not have to make an explicit ruling on each and every factual issue: at [35]- [36]. (f) The decision should demonstrate an examination ofthe relevant evidence and the facts found with a view to explaining the final outcome on each material issue: at [36]." 73.In AKN & Anr. v. ALC & Ors. (2015) SGCA 18, the Singapore High Court, again in considering the natural justice requirement contained in Section 24(b) of the International Arbitrat....
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....ieved party's case), then the inference that the arbitrator did not apply his mind at all to the dispute before him (or to an important aspect of that dispute) and so acted in breach of natural justice should not be drawn. 47. Front Row was recently considered in AQU v AQV [2015] SGHC 26 ("AQU"), where the High Court judge distilled the very principles which we have just enunciated above (see AQU at [30]-[35]). The judge in AQU also considered the High Court decision of TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 ("TMM"), and reiterated the proposition that no party to an arbitration had a right to expect the arbitral tribunal to accept its arguments, regardless of how strong and credible it perceived those arguments to be (see AQU at [35], citing TMM at [94]). This principle is important because it points to an important distinction between, on the one hand, an arbitral tribunal's decision to reject an argument (whether implicitly or otherwise, whether rightly or wrongly, and whether or not as a result of its failure to comprehend the argument and so to appreciate its merits), and, on the other hand, the arbitral tribunal's failure t....
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.... with the arbitrator simply having misunderstood the aggrieved party's case, or having been mistaken as to the law, or having chosen not to deal with a point pleaded by the aggrieved party because he thought it unnecessary, then the inference that the arbitrator did not apply his mind at all to the dispute before him or to an important aspect of that dispute and so acted in breach of natural justice should not be drawn. xxx xxx xxx 141. Although the Majority did not comment on the legal basis for the application of a discount rate, it does not mean that it did not consider the issue. A tribunal does not have to give responses on all submissions made (SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 at [60]). xxx xxx xxx 159. The legal area concerning the enforcement and setting aside of awards is governed by statute, namely the Arbitration Act (Cap 10, 2002 Rev Ed) and the IAA. As such, the conceptual framework outlined in UKM can be helpful to navigate public policy considerations in arbitration, even though the subject matter of the public policies that can be raised under Art 34(2)(b)(ii) of the Model Law and Art V(2)(b) of the New Yo....
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....2 in their e-mail dated 13.06.2016 on merit as if it is a Court of Original Jurisdiction and find out whether such submission of the respondent nos. 1 and 2 had any merit or not. Once it is found that the Arbitrator has ignored the submissions of a party in totality, whatever be the merit of the submissions, in my opinion, such Award cannot be enforced being in violation of the Principles of Natural Justice and contrary to the public policy of India as stated in sub-Section 2(b) read with Explanation 1(iii) of Section 48 of the Act. xxx xxx xxx 76. It may be correct that the Arbitrator, upon considering evidence led before it by the parties, comes to a conclusion that in the given facts the transaction, though under different Contracts, is one or that the corporate veil deserves to be lifted, however, for arriving at such a finding the Arbitrator has to give reasons for the same. This Court, in exercise of its power under Section 48 and 49 of the Act, cannot supplant such reasons by considering the claims and defence of the parties on merit. Whether the request of the respondent no. 1 to the petitioner to make shipments in the name of respondent no. 2 under Contra....
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....rgument which goes to the root of the case or findings based on evidence which go behind the back of the party and which results in a denial of justice to the prejudice of the party; or additional or new evidence is taken which forms the basis of the award on which a party has been given no opportunity of rebuttal, would, on the facts of a given case, render a foreign award liable to be set aside on the ground that a party has been unable to present his case. This must, of course, be with the caveat that such breach be clearly made out on the facts of a given case, and that awards must always be read supportively with an inclination to uphold rather than destroy, given the minimal interference possible with foreign awards under Section 48. 77.All the cases cited by Mr. Nakul Dewan are judgments based on the language of the particular statute reflected in each of them - for example, Section 68 of the Arbitration Act, 1996 (U.K), Section 23(2) of the Hong Kong Old Arbitration Ordinance (Cap 391), Section 24(b) of the International Arbitration Act (Singapore) and Section 48(1)(a)(vii) of the Arbitration Act, 2002 (Singapore), all of which are differently worded from Section 48(1)(b....
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.... and an issue as to interest may not be answered at all. This again may, on the facts of a given case, amount to an implied rejection of the claim for interest. The important point to be considered is that the foreign award must be read as a whole, fairly, and without nit-picking. If read as a whole, the said award has addressed the basic issues raised by the parties and has, in substance, decided the claims and counter-claims of the parties, enforcement must follow. Violation of FEMA Rules 79.It has been argued by the Appellants, based on the Non-Debt Instrument Rules, that a foreign award by which shares have to be purchased at a discounted value, would violate the aforesaid Rules, and therefore, would amount to a violation of the fundamental policy of Indian law. Resultantly, the Appellants contended that as a result of this, the award in the present case would not be enforceable in India. 80.The relevant provisions of the aforesaid rules are set out hereinbelow: "2. Definitions: xxx xxx xxx (ac) "investment" means to subscribe, acquire, hold or transfer any security or unit issued by a person resident in India; Explanation:- ....
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....ecurities and Exchange Board of India. (2) Unless otherwise prescribed in these rules, theprice of equity instruments of an Indian company, xxx xxx xxx (b) transferred from a person resident in India to a person resident outside India shall not be less than,xxx xxx xxx (iii) the valuation of equity instruments done as per any internationally accepted pricing methodology for valuation on an arm's length basis duly certified by a Chartered Accountant or a Merchant Banker registered with the Securities and Exchange Board of India or a practising Cost Accountant, in case of an unlisted Indian company." 81.Based on the aforesaid Rules, the Appellants have argued that the transfer of shares from the Karias, who are persons resident in India, to the Respondent No.1, who is a person resident outside India, cannot be less than the valuation of such shares as done by a duly certified Chartered Accountant, Merchant Banker or Cost Accountant, and, as the sale of such shares at a discount of 10% would violate Rule 21(2)(b)(iii), the fundamental policy of Indian law contained in the aforesaid Rules would be breached; as a result of which the award cannot be enforced. 8....
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....out by the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. (supra), the object of FERA was to ensure that the nation does not lose foreign exchange essential for economic survival of the nation. With the liberalization and opening of India's economy it was felt that FERA must be repealed. FERA was enacted to replace the Foreign Exchange Regulation Act, 1947 which was originally enacted as a temporary measure. The Statement of Objects and Reasons of FERA indicate that FERA was enacted as the RBI had suggested and Government had agreed on the need for regulating, among other matters, the entry of foreign capital in the form of branches and concerns with substantial nonresident interest in them, the employment of foreigners in India etc. xxx xxx xxx 110. The contention that enforcement of the Award against Unitech must be refused on the ground that it violates any one or the other provision of FEMA, cannot be accepted; but, any remittance of the money recovered from Unitech in enforcement of the Award would necessarily require compliance of regulatory provisions and/or permissions." 83.This reasoning commends itself to us. First and foremost, FEMA ....
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....ted in FEMA, in replacement of FERA, the said provision has become unconstitutional in the changed situation.This submission was repelled by this Court stating: "66. It is true that provisions of FERA and FEMA differ in some respects, particularly in respect of penalties. It is also true that FEMA does not have provision for prosecution and punishment like Section 56 of FERA and its enforcement for default is through civil imprisonment. However, insofar as conservation and/or augmentation of foreign exchange is concerned, the restrictions in FEMA continue to be as rigorous as they were in FERA. FEMA continues with the regime of rigorous control of foreign exchange and dealing in the foreign exchange is permitted only through authorised person. While its aim is to promote the orderly development and maintenance of foreign exchange markets in India, the Government's control in matters of foreign exchange has not been diluted. The conservation and augmentation of foreign exchange continues to be as important as it was under FERA. The restrictions on the dealings in foreign exchange continue to be as rigorous in FEMA as they were in FERA and the control of the Government o....
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....epending upon the nature of the ground argued. We now deal with each of these grounds seriatim. I. The Tribunal failed to deal with the Appellants' counter-claim pertaining to the incorporation of Jaguar Communication Consultancy Services Private Limited. 86.According to the Appellants, this ground of objection - i.e. the incorporation of Jaguar - was pleaded by them as a "concealed breach", which became known to them only at a much later stage of the arbitral proceedings. Despite the tribunal specifically ruling in the First Partial Final Award that a non-defaulting party could rely on a "concealed breach" and treat the same as an unrectified event of default under clause 23.4 of the JVA, the submission made by the Appellant in this behalf was ignored in its entirety. This was countered by Respondent No.1 by stating that there was no "concealed breach" at all, inasmuch as, as early as 05.10.2012, the Appellant had filed a request calling upon the Respondent to produce documents which included the list of clients, employees and disclosure of business activities of Jaguar. These documents were called for in order to buttress the case of the Appellant that the Respondent was in....
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....nt's efforts to oust Appellant No.1 and his family from Ravin amounted to a breach of the JVA. In answer to this submission, the tribunal, in the Second Partial Final Award, expressly set out the following: "6. Further, the parties both identify different catalysts for the breakdown of the JVA relationship. In short, the Respondents submitted that, as far as they were concerned, during the tenure of Mr Sarogni their relationship with the Claimant was good and both parties were working together to make Ravin a more successful company. The swing point came and the trouble started brewing when Ms Farise was sent out to head the affairs of Ravin with the single agenda to take control of Ravin and oust the Karias. The Respondents' overall case theory therefore focuses on a clash of personalities combined with the acquisition of ACPL and the Claimant's overriding intention to create a situation where the Karias appeared to be in breach so that the Claimant could buy the Respondents out for a lower price. 7. The Claimant submitted that whilst relations had not been good from the time of the JVA onwards, matters took a turn for the worse after 15 September 2011, w....
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....in which the Respondents do not emerge without serious criticism. As is clear from this Award the Respondents engendered a toxic atmosphere at Akruti in January 2012 (even in its fire stricken state) and such was the situation at the ground that it was not really possible for Claimant nominees to attend without fear of their own safety. 294. Lastly, the circumstances surrounding theappointment of the CEO and CFO does not give rise to any conceivable material breach on the part of the Claimant. The Claimant was entitled to nominate a CFO and the CEO. They did so. The Respondents did not oppose the appointment of Ms Farise. Nevertheless they did obstruct her at every turn once she was appointed because it became apparent that she intended pursuant to the JVA to take day to day control of Ravin and the Respondents did not wish this to happen. As regards Mr Brunetti, the CFO, the Respondents did veto his appointment. This was not a material breach on their part as it was their right to do so under Schedule IX to the JVA. Nevertheless it cannot be said to be a material breach by the Claimant. That is unsustainable. CONCLUSION 295. The Respondents have....
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....o has the right to register the Ravin trademark. 2) Whether the Tribunal has jurisdiction to decidealleged breaches of the Trademark License Agreement. 3) Whether the Tribunal has jurisdiction to decidealleged breaches of the Technical Assistance Agreement. 137. The Tribunal concludes that it does not havejurisdiction in respect of any of these three matters. 138. The ownership of the Ravin trademark and theright to register the same is not a dispute arising out of, relating to, or in connection with the JVA. There is no provision in the JVA permitting the parties to the JVA to change the name of Ravin Cables to a new name incorporating the word Prysmian - see Clause 9. There is also a provision for Ravin to enter into a trademark licence agreement in the form of Schedule 5, but that agreement deals with the licence by Prysmian and not the Ravin trademark. 139. Quite simply a dispute regarding the right toregister the Ravin trademark falls outside of the scope of the arbitration clause. 140. This makes it unnecessary for the Tribunal toconsider further the interesting and difficult questions of the arbitrability of such disputes....
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....Singhvi argued that the tribunal acted contrary to the admissions of the parties' expert witnesses and ignored critical evidence with regard to the acquisition of ACPL. Further, since the Respondent failed to produce the relevant documents regarding the competing business carried out by ACPL, an adverse inference ought to be drawn against the Respondent No.1, which the Appellants allege the learned arbitrator failed to do. 93.The learned arbitrator indicated his approach in the Second Partial Final Award as follows: "23. Whilst therefore the parties' detailed submissions have set the parameters for the Tribunal's decisions and have assisted the Tribunal in reaching its conclusions on the individual particulars of alleged material breach, it has simply not been possible and nor is it desirable for the Tribunal to undertake an exhaustive analysis of each sub-argument and each piece of evidence referred to. Instead, in disposing of this dispute the Tribunal will focus, in large part, on the heart of the rival contentions with respect to the dispute as a whole and the individual allegations in the rival Determination Notices. This requires the detailed submissions t....
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....ent No. 1, being an indirect subsidiary of Respondent No.1's parent company consequent upon the acquisition of Draka. It has an independent Board of Directors. Above all, ACPL was not a party to these arbitral proceedings. The tribunal therefore made Procedural Order No. 5 dated 27.11.2012 in which it specifically recorded that if the Appellants wish to pursue their request for disclosure of further documents qua ACPL, they must approach the Courts to do so, as it was not within the arbitrator's power to direct a person who is not party to the proceedings to produce documents. At no stage did the Appellants act in compliance of this Procedural Order and approach an English Court to direct ACPL to produce documents within its possession. This being so, as has been held hereinabove, a party cannot complain of breach of natural justice when it was within the control of such party to approach a U.K Court for production of such documents. This not having been done, it is clear that no adverse inference, as has been argued, could have been drawn by the learned arbitrator. This ground also, therefore, does not fall within any of the grounds argued before us under Section 48. V. Pervers....
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....irtue of these direct sales somewhat academic. 278. Indeed these figures illustrate exactly why the Respondents placed so much emphasis on their argument that the mere fact of sales was a breach irrespective of anything else. This was once more how it was put by Mr Salve SC in his oral closing argument (Day 10, pp. 183-185) The Tribunal has, however, found against the Respondents on this point." 98. Having perused the Award in this behalf, it cannot be said that the tribunal has in any manner ignored admissions or other critical evidence with regard to the issue of direct sales. In any case, if at all, this ground goes to alleged perversity of the award, which as has been held by us hereinabove, is outside the ken of Section 48. VII. The Tribunal adopted disparate thresholds in determining material breach 99.Dr. Singhvi has then argued that the tribunal adopted disparate thresholds for determining material breach between the Appellant and the Respondent. Again, all the allegations made under this ground go to perversity of the award, which is outside the ken of Section 48. That apart, the tribunal indicates in paragraphs 104 to 106 of the Second Partial Final Awar....
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....l Award dated 11.04.2017 by the learned arbitrator as follows: "II. Deloitte Valuation Report and the Respondents' Challenge to Deloitte 4. It is important at this stage to record one specificmatter here which is referred to and set out in the Claimant's submissions (see paragraph 24 and Annexure E thereto at pages 170-172) and not contradicted by the Respondents in its submissions. On 14 October 2014 (Annexure E p. 171), Mr Karia on behalf of the Respondents sent an email to the Claimant in response to the Claimant's request dated 14 October 2014 (Annexure E p.170) that the Respondents do cause the Company in a timely fashion to execute the Engagement letter for Deloitte. On 14 October 2014 (Annexure E p.171), Mr Karia for the Respondents objected to the engagement of Deloitte contending that they were conflicted out of acting as Valuer. This was a remarkable stance to take. On 30 April 2013 the Respondents, via an email sent by their solicitors, had confirmed that the Respondents were agreeable to Deloitte or KPMG acting as independent Valuers under the JVA. The Tribunal noted and recorded this in the Preamble to Procedural Order No 12, albeit referr....
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....oitte's role as auditor of Power Plus was known to the Respondents and having agreed not to object to Deloitte in their 30 April 2013 email it was no longer open to the Respondents to advance this point. There was no breach of the JVA but even if there had been it was waived by the Respondents. 6. Thus following this exchange, Deloitte were in duecourse engaged albeit through the default mechanisms provided for in Procedural Order No 12." We are satisfied that the learned arbitrator has considered this point in some detail and dismissed it. This objection again does not fall under any of the grounds mentioned in Section 48. X. Valuation ignores Ravin's stake in Power Plus 102. Dr. Singhvi then argued that the valuation made by Deloitte ignored a stake of 49% of Ravin in a company called Power Plus, which stake has been valued by the Appellants' valuer (one BDO) at INR 563 crores. Considering that this aspect was not taken into account by Deloitte, the valuation report ought not to have been accepted by the learned arbitrator, also being contrary to the position taken by both parties. This submission was dealt with by the learned arbitrator in great detail in para....
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....eason of the Respondents' complaint with regard to Deloitte's involvement which is made to the LCIA. It is notable that the Respondents have not in their submission denied that they made such a complaint to the LCIA and have not contradicted the Claimant's submission that this complaint materially contributed to the delay in the production of the Deloitte Report. 3) Furthermore, the Respondents are not entitled tocomplain that Deloitte has used a valuation date of 30 September 2014. This was the valuation date agreed to and requested by the Respondents. Furthermore, as is recorded in the Recital to Procedural Order No 12 prior to the hearing in October 2014 leading to the making of the order of the valuation date, the Respondents expressly accepted that the question of the Valuation date was a matter properly within the jurisdiction of and for the determination of the Tribunal. The Tribunal then made an order for the valuation as requested by the Respondents." Having found that the delay in the valuation report was attributable largely to the Appellants and that therefore the agreed date of 30.09.2014 is the correct date, we find nothing in the award which c....
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....hat this agent was clear as to the outcome of the proceedings. This was strongly refuted by the Respondent, stating that at no time had Gilbert Tweed Associates been retained by them. As a matter of fact, an agency called M/s Key2People was engaged by Respondent No.1 to identify potential candidates who could be recruited for the company in due course. M/s Key2People, in turn, appointed M/s Gilbert Tweed Associates. In any case, the Respondent undertook to terminate the engagement of M/s Key2People by its email of 28.10.2013. The allegation of bias thus made was clearly a desperate afterthought. The contention that the arbitrator was otherwise biased was dealt with in the Final Award as follows: "16. The Respondents have also made a repeated reference to an allegation that the Tribunal lacked independence and that the Respondents have lost faith in the Tribunal continuing to give an impartial determination of the matters which remain in dispute. 17. These allegations have already been raised by the Respondents and rejected by the LCIA Court. Furthermore, the Respondents have not sought to invoke any procedure in the English Court, which is the court of the seat wi....